By The Editorial Board | March 19, 2025

SENATE Bill (SB) 2826, or the “Enhanced Fiscal Regime for Large-Scale Metallic Mining Act,” passed on its third and final reading last month, which is a troubling development. There is, however, still an opportunity to correct the measure’s major flaw, as it must go through the bicameral conference process with its counterpart House Bill (HB) 8937.

SB 2826 has two main components, the first and less contentious being a margins and windfall profits-based tax scheme that would increase the government’s share of revenues from mining. HB 8937 also proposes a similar fiscal framework. This part of the measure has been supported by business groups, most notably the Chamber of Commerce of the Philippine Islands (CCPI), and also by the mining industry, albeit with some reluctance.

In a joint statement issued around the time SB 2826 passed on second reading in the Senate at the end of January, the Chamber of Mines of the Philippines (COMP) and the Philippine Nickel Industry Association (PNIA) issued a joint statement endorsing the measure.

“Given that a mining tax increase is unavoidable, we express our support for the fiscal provisions of Senate Bill [SB] 2826,” the joint statement said. “We believe this system will put the Philippines [on] par with other mining jurisdictions and help ensure a sustainable and vibrant industry.”

The part of SB 2826 that the mining industry objects to rather strongly, however, is the export ban on mineral ores that it proposes, which would go into effect after a five-year grace period. This ban would cover the Philippines’ main mineral products, which include nickel, copper, iron and gold, and is similar to a ban implemented in Indonesia several years ago covering nickel and bauxite (aluminum) ore exports.

The purpose of the ore export ban is to compel development of a downstream metals processing industry. No one has a problem with that ambition, and it is in fact the most sensible economic path for any country with mineral resources. Raw ore is the least-valuable export, and mineral reserves are nonrenewable; thus, the nation should seek to capture the highest value possible.

However, anticipating that a mineral processing industry of any scale can be developed within five years is completely unrealistic, an idea that is the product of sentiment-driven legislators with good intentions but little to no industrial expertise or experience. Both COMP and PNIA have pointed out that the country has neither the substantial electric power infrastructure needed or the transportation infrastructure to support such a rapid development of metals processing. An enormous amount of investment will be needed as well. COMP and PNIA presented a figure of $1.6 billion needed to build a processing plant, which seems like a very general estimate, but does provide a sense of the scale of the undertaking.

It is also difficult to ignore that the existence of abundant mineral resources in the Philippines and a reasonably well-developed mining sector that has been operating for decades has not attracted investment in downstream processing. This is precisely because the infrastructure needed does not exist. Indonesia had the same circumstances, but the effort to force mineral processing industries to locate there was only partially successful; it has had to roll back some of its ore export bans, because of the risk that some mining operations would shut down due to being cut off from any markets.

The mining sector, as well as a number of economic analysts, fear the same situation would develop here in the Philippines. Instead of maximizing the value of extracted mineral resources, no value at all would be derived from them as there would be no accessible market.

The recommendation of COMP and PNIA to extend the “grace period” before imposition of an ore export ban from five years to 10 years is sensible, and an even longer period may be more realistic. Development of value-adding mineral and metal processing capacity should absolutely be the goal, but achieving the goal will only be possible if there is a realistic assessment of what supporting infrastructure and development is needed, and enough time allotted to fill those gaps.

Source: The Manila Times

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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